Pain starts to spread as state shuts its wallet

Times Staff Writers

With no resolution in sight, the longest state budget standoff in Gov. Arnold Schwarzenegger’s tenure is alarming hundreds of organizations that provide healthcare and other services throughout Southern California.

Child-care providers aren’t getting paid. Directors at healthcare clinics, whose survival depends on state Medi-Cal payments, warn that bankruptcy is looming. Officials at facilities that care for the developmentally disabled worry that they will be unable to hang on more than a couple of weeks.

The pain is not felt equally. Hospitals, community colleges and other big institutions may have reserves to fall back on or easy access to bridge loans. But for the hundreds of smaller, community-based providers throughout Southern California that often provide a lifeline for immigrant and low-income populations, the impasse is more than an inconvenience. It’s a financial crisis.

“The budget is now more than a month overdue,” a frustrated Schwarzenegger said in Sacramento on Thursday. “State services are disrupted, and hardworking families are not going to get their paychecks. I think Californians deserve better than that.”


The governor’s attempt to break the deadlock came up short Wednesday night, after GOP senators rebuffed his offer to use his line-item veto authority to erase hundreds of millions of dollars of spending they find objectionable from the budget.

“I don’t really know now what it takes to close it, and I hope they know,” Schwarzenegger said.

Prospects for an agreement any time soon looked bleak Thursday. Many lawmakers left for their districts after Senate Republicans blocked a spending plan the night before. Their leader, Dick Ackerman, showed no sign of backing down. And the Democrats said they were through negotiating.

There is talk of not returning for several weeks, when the Assembly’s vacation ends.


The state’s longest budget impasse was in 2002, but then the state had reserves large enough to cover most healthcare payments. But those reserves, conceived as a bridge loan, have already been depleted this year. Hence, the state has been unable to pay out $1.1 billion due in July. Without a budget, an additional $2.1 billion won’t be paid during the course of this month.

“It’s a disaster,” said Elizabeth Benson Forer, chief executive officer of the Venice Family Clinic in Venice. “Clinics can’t afford for the legislative folks to be on break.”

Absent a state budget, the clinic will not receive about $260,000 in assistance this month.

“We’re all struggling to stay even this year, operating on a very tight margin,” Forer said. “Anything upsetting really makes it difficult to provide care.”


At nursing homes, the cash crunch threatens not only their ability to pay staff but to buy essential supplies, such as food for elderly residents.

Eduardo Gonzalez, who with his wife owns the Fillmore Convalescent Center in Fillmore, said their food supplier may soon stop delivery. Of the home’s 88 patients, 64 are on state-funded Medi-Cal.

Unless a budget is passed within three weeks, Gonzalez said, he probably will be unable to pay his employees.

“Our resident staff should not be punished for what the Legislature is not able to do,” Gonzalez said.


Small homes for developmentally disabled adults are another immediate casualty of the state budget fight. They rely completely on state funding.

Bob Horrigan runs 19 homes, each with six beds, in La Verne and throughout San Bernardino County. He said he had suspended all repairs on vans, houses and wheelchairs, and soon would be unable to pay his employees. He and his wife, who together own the homes, are exploring ways to borrow money. But Horrigan said that his bank is balking and that other potential sources of money carry steep interest rates.

“Times like this you get money wherever you can,” he said. “You alienate your family. You go behind on your mortgages.”

He said lawmakers have no good excuse for missing the state’s June 30 deadline to finish a budget for the new fiscal year.


“Excuse my expression, but it’s a pissing contest between little baby frat boys, and I think it’s irresponsible to put people in this bind,” he said.

He said the budget impasse was “extremely frustrating, especially when you’re in a business that deals with people. We’re not coldhearted businesspeople. We’re basically social workers that try to make things work for people.”

The inability of the state to cover its bills is equally hard on the thousands of in-home child-care providers whose clients pay them with state subsidies. The caregivers, many already living on the margins themselves, rely on the state checks to pay their own rent and utility bills. This week the checks stopped coming.

“They will eventually get the money, but they need it right now to pay the rent,” said Cliff Marcussen, the executive director of Options, a West Covina nonprofit that facilitates state payments to 1,000 child-care providers.


The state has suspended the subsidies for more than 250,000 children.

“Without payment from the state very soon, our programs -- full of children of low-income parents -- will have to close, leaving them with no child care,” Kathy Lafferty, North President for the Child Development Administrators Assn., said in a written statement. “How does this serve the people of California or its businesses?”

Even if some of the larger institutions that provide state services are able to weather the budget impasse, many of the small businesses that are a backbone of their operations may not.

“I’m already living on borrowed time, as far as my bills, insurance and payroll,” said Daniel Rojas, general manager of Midway Care Medical Transportation, an Artesia company that shuttles about 300 dialysis patients from their homes or nursing facilities to treatment centers. Rojas, who employs 25 people, said 95% of his funding comes from the state. He is frantically trying to secure a bridge loan, but his prospects are uncertain.


“If this doesn’t get settled by the 10th, I would have to shut the doors down,” Rojas said. “It’s going to put us out of business.”



Times staff writers Christian Berthelsen and Tiffany Hsu contributed to this report.



Didn’t get paid


California Controller John Chiang says that he already has withheld $1.1 billion in state payments that were due in July, and may have to withhold an additional $2.1 billion in August if the budget impasse continues.

Some who didn’t get paid last month:

* Community colleges, $327 million

* Schools and day-care programs, $300 million in child development funds


* School districts, $170 million for special education and other programs

* Companies that sell goods to the state, $140 million

Source: Controller’s office